New FSA Data Show Dip in New Loan Defaults, Usage of Early FAFSA

Data from Federal Student Aid’s (FSA) quarterly reports on the characteristics of aid recipients and Title IV programs showed increased use of income-driven loan repayment plans, a decrease in new defaults on federal student loans, and an indication that aid applicants took advantage of the first year of the Early FAFSA. The reports also provided more information on federal loan borrower characteristics and loan volume.

The quarterly update reported that the federal student loan portfolio currently stands at $1.34 trillion, with Direct Loans representing more than 75 percent of the overall portfolio. Overall, 42 percent of outstanding federal loan dollars come from public institutions, 32 percent come from private institutions, and 17 percent come from for-profit institutions. Another 1 percent comes from foreign schools. Borrowers between the ages of 25 and 49 hold 72 percent of all outstanding loan dollars. Consistent with other reports, more than half (57 percent) of all federal loan borrowers owe less than $20,000, and just 5 percent owe more than $100,000.

Borrowers’ enrollment in income-driven repayment plans has continued to increase. As of June 2017, nearly 6.3 million borrowers were enrolled in such a repayment plan, which represents an increase of 19 percent from June 2016. Meanwhile, new Direct Loan defaults have continued to decrease. During the most recent fiscal quarter, about 265,500 borrowers – or 1.6 percent of all borrowers in repayment during that quarter – entered default, down from 1.7 percent last year.

The data also indicated that federal student aid applicants may have taken advantage of the Early FAFSA. As of the end of June 2017, more than 14 million FAFSAs had been submitted for the 2017-18 award year – a 6.3 percent increase in the number of submitted applications by June 30, 2016. The report noted that the number does not necessarily show an anticipated overall increase in submitted FAFSAs, but rather a result of families filing sooner with the earlier release date.

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